New York High Court Once Again Emphasizes the Importance of Specificity When Claims are Potentially Not Covered

May 23, 2014

On February 18, 2014, in a 5-2 decision, the New York Court of Appeals in QBE Insurance Corporation v. Jinx-Proof, Inc., et al., affirmed the January 18, 2013, holding of the Appellate Division, First Department, finding QBE Insurance Corporation (“QBE”) to have adequately disclaimed coverage to its insured, Jinx-Proof, Inc. (“Jinx-Proof”), with respect to assault and battery claims asserted in the underlying litigation, even though a defense was initially afforded by QBE subject to a specific reservation of rights to deny coverage pursuant to the assault and battery exclusion.

This declaratory judgment action was commenced as a result of the underlying action, which arises out of a bar fight at Jinx-Proof’s Manhattan bar, and was commenced against Jinx-Proof by a patron who sustained injuries after she was hit with a piece of glass thrown by a bar employee. Within 30 days of receiving notice of the accident by Jinx-Proof, QBE issued two letters titled “Reservation of Rights” to Jinx-Proof, whereby it provided notice that although it would be affording a defense to Jinx-Proof in the underlying action, said defense was subject to a reservation of rights to deny coverage for any assault and battery claims.

As expected, the New York Court of Appeals affirmed the holding of the lower courts, with the majority holding that the first of two reservation of rights letters issued by QBE to Jinx-Proof clearly stated that QBE would not be affording a defense or indemnity to Jinx-Proof “under the General Liability portion of the policy for [the underlying] assault and battery allegations,” as said claims were clearly precluded by the policy’s assault and battery exclusion, and that Jinx-Proof did not purchase and, therefore, was not entitled to liquor liability coverage from QBE. The majority further opined that “[a]lthough the [two] letters contained some contradictory and confusing language, the confusion was not relevant to the issue in this case.” Moreover, irrespective of the fact that the letters were both titled “Reservation of Rights,” they were nonetheless effective as they specifically and consistently stated that Jinx-Proof’s insurance policy exclude[d] coverage for assault and battery claims.

Once again, we reiterate that, where even a mere possibility of disclaiming coverage under an insurance policy, an insurer must issue correspondence with unequivocal language that specifically and definitely notifies its insured of the grounds upon which coverage may be denied.